Do Vacation Homes Make a Good Investment Option?

"The average rental return does not exceed 2-7 percent annually for most holiday destinations. Most cities usually yield higher returns," according to Shveta Jain, director, residential services, Cushman & Wakefield India.

Before investing on vacation homes, it is important to research on the potential growth of the destination. As, capital growth is usually higher in places that attracts tourist round the year and have healthy economic growth. Also, if the destination attracts people other than tourism purpose, such as meetings, incentives, conventions, exhibitions and others, the demand for property will be continuous in such places, which in turn will increase demand for your property as well as it will be easier to find tenants for your vacation home. 

Although, capital appreciation is one criterion for buying property yet, you need to consider other factors, such as accessibility, the market dynamics of the location, close proximity to business centre and major tourist attractions.

Anand Narayanan, national director, residential agency, Knight Frank India, gave an opinion that there must be some right reasons to buy a vacation home. He further stated that "Vacation homes are usually lifestyle choices, not financial investments. If you want to invest in real estate, consider buying a property in a city rather than in an out-of-the-way destination," reports Economic Times.